Trading in the forex market is a tremendous business. You do not have to worry about employees, inventories, somebody to answer to; you are in charge of the whole investment. The advantages go on and on.
However, as it is the case with other business ventures, you need to understand what is required of you to realize success. Forex trading, as with other business ventures, lurks danger. If you do not take proper precautions, then you might be wiped out of the business. 'You should get rid of bad trading habits if you would like to realize success in your investment,' CMC Markets noted.
A breakthrough in any business comes after dedication, hard work, and long hours of practice. Traders should avoid the following bad business habits in order to realize success.
- Trading Without a Plan
Some traders would resolve to trade with no plan – a perfect recipe for disaster. They decide to follow a rumour or they think that a big market changing event is about to occur and they 'can predict correctly' the direction it will move. I assume that the plan will work out if you have a plan. Unfortunately, most traders do not have.
For you to remain relevant in the business, you have to develop a reasonable course of action that will serve you right.
- Averaging Down a Loss
Every forex trader should understand that whenever they encounter a loss, they need to embrace it and move on. Averaging down a loss has been a major setback for many forex traders. If ripping into a numerous contract positions is not in your plan, then do not think of adding to an already losing position!
Lack of patience is a major drawback for many traders. You have to to predict the outcome of your trade and wait. You should not keep hopping from one trade to another without careful consideration. It takes patience to reap the fruits of your trade.
For instance, the recent developments concerning the USD/CAD currency received a major surprise after Canada released its employment data. Such incidents saw the demand on the commodity-related Canadian currency surge – a very peculiar trend since September 5.
You might set a target and attain it. However, you will be tempted to wait to see if the market will continue to move in your target. This will be a clear indicator of greed setting in.
The forex market is very dynamic. The events proceeding at the moment may not be relevant in the next hour. Therefore, if you manage to reach your goals, then do not turn the trading into a gambling scenario lest you are prepared to have the market turn against you.
- Leaving Money
It is okay to allow your account to grow. However, you need to remove a certain amount to reward yourself.
You would like to think of the original investment as a loan. You would prefer to have the loan paid off as quickly as possible; as a result, further withdrawals are all yours.
Furthermore, you will be in a position to enjoy all the income without worries; knowing that the original risk capital is safe and you are financially at the top of the game.
- Changing Strategy in the Course ofTrading
This is the worst mistake a trader can make. When the market is on its feet and you are witnessing every move in the game the combination of emotion and adrenaline may disturb your judgment. This is the main reason for planning your trades before the market opens.
It is only when at that time that you can plan well and consider sound judgment for your analysis. Whenever the market is open, you should never change your game plan unless there is an obvious alteration in the market.
If you do so you will be acting on an impulsive and emotional reaction that will end up destroying your entire rational plan. Therefore, make a plan and learn to stick with it.
If you take into account the tips mentioned above, then forex trading might work in your favour. With the current forex market, careful consideration before taking part in a trading session is crucial.